That Old Mario Magic
Oil prices are getting a boost from that old Mario magic as the European Central Bank head tried to explain everything from oil to the Phillips Curve. His upbeat comments about the economic recovery in the EU and his explanation why energy prices are a drag on inflation, sent the euro currency soaring and the dollar falling. That drop in the dollar gave oil a boost which is still trying to bottom at a key support level after having one of the worst down months in recent memory.
Draghi was upbeat but warned that the weakness in oil and other commodities might be because of the lingering effects of the economic slowdown. It is one reason that despite the economic recovery, inflation has remained low and while it could be just a bit of oversupply, the lack of inflation that is puzzling central bankers around the globe.
But the Central banker speech fun is just beginning as Bank of England Governor Mark Carney is set to speak about the bank’s Financial Stability Report at 6 a.m. Eastern Time. In London, Federal Reserve Chairwoman Janet Yellen will speak at 1 p.m. Eastern time according to Market Watch. Based on the post Draghi Market move, we must pay attention as these speeches could move us today.
Oil may also see some short covering ahead of tonight’s American Petroleum Institute report that should show big drops in supply due to Tropical Storm Cindy. At The same time, the price crash that we have seen is causing talk of investment in shale projects, a sign that efficiencies in production of shale may be going backward.
Dow Jones reported efficiency gains being made in the West Texas oil patch look to be slowing down. Oil output per rig in the Permian Basin, a prolific drilling field, has dropped steadily since last August, according to estimates kept by the U.S. Energy Information Administration. Production there is expected to be 602 barrels a day per rig in July, down 14.5% from August 2016. "We expect productivity to ultimately decline 30% over 2017," analysts at Baird said.
Gasoline RBOB Futures look like they may have bottomed as well. We hit key support and we are oversold and low pump prices should inspire extra demand.
“Phys.0rg” says it solved the mystery as to why all the oil from the Deep-water Horizon disappeared. Chemicals and microbes! That’s right! They report that a team, led by Berkeley Lab microbial ecologist Gary Andersen, is the first to simulate the conditions that occurred in the aftermath of the deepwater spill. Their study, "Simulation of Deepwater Horizon oil plume reveals substrate specialization within a complex community of hydrocarbon-degraders," was just published in the Proceedings of the National Academy of Sciences. In other words, they found out why the oil spill was not the disaster that everyone thought it was going to be.
“This oil spill was the largest in history, with the release of 4.1 million barrels of crude oil as well as large amounts of natural gas from a mile below the surface of the ocean. After the initial explosion and uncontained release of oil, researchers observed a phenomenon that had not been seen before: More than 40 percent of the oil, combined with an introduced chemical dispersant, was retained in a plume nearly 100 miles long at this great depth. But the oil went away because of what they say is a newly discovered bacterium!
DNA sequencing of its genome identified what was a new bacterium and mechanism for degrading oil. They gave this newly discovered bacterium the tentative name of “Bermanella macondoprimitus” based on its relatedness to other deep-sea microbes and the location where it was discovered. “Our study demonstrated the importance of using dispersants in producing neutrally buoyant, tiny oil droplets, which kept much of the oil from reaching the ocean surface," Andersen said.
"Naturally occurring microbes at this depth are highly specialized in growing by using specific components of the oil for their food source. So, the oil droplets provided a large surface area for the microbes to chew up the oil. "We now have the capability to identify the specific organisms that would naturally degrade the oil if spills occurred in other regions and to calculate the rates of the oil degradation to figure out how long it would take to consume the spilled oil at depth," Andersen said.
Natural gas is back in rally mode as prediction of a larger heat dome could make its way over most of America.
DT WxRisk.com says that the, "12z regular European model has jumped on board with the GFS model and now it does move the heat ridge with an embedded dome from the Rockies into the heart as central Plains and the Midwest by D9-10.
This clearly shows the heat ridge and in place over Missouri Illinois Arkansas Indiana and Western Kentucky. If this solution is correct and that is a big IF...it would clearly shifted jet stream well to the north shut off the precipitation for most of the Midwest and send temperatures close to 100° especially west of Mississippi River.
Again let me point out that this is significant change from the early Monday morning European model. Still the fact that this solution now agrees with the operational GFS model does give some support the idea that the possibility exists for the heat dome over the Rockies and the western Plains COULD come east at some point in the middle of July. For how long and what sort a temperatures it's hard to say at this time. But this is an interesting trend.
What! Another fat finger trade, this time in gold. The gold drop in the middle of the height shook out some longs but the outlook for gold is improving.